NEW YORK (TheStreet) – It's easy to come up with a laundry list of reasons to avoid certain stocks. Before investing, there are three key questions a person should ask. First, is the company buying back stock? Second, does it pay a dividend? And finally -- relative to the broader market or when compared to its peer -- how much value can one realistically expect by buying the stock at the current market price? Discover Financial , the thirteenth-largest bank in U.S. by market capitalization, meets all three criteria. So ahead of the company's first-quarter earnings results Tuesday, the Riverwoods, Illinois-based financial giant has begun to project the level of confidence that has made it a favorite among analysts. Must Read: Warren Buffett's Top 10 Dividend Stocks Not only does the stock have a consensus buy rating, its average price target of $70 implies that, on average, analysts expect almost 20% gains from current levels of around $59. Last week, the company's board of directors authorized a new stock buyback program worth $2.2 billion. This new buyback authorization replaces the $3.2 billion-plan the company already had in place, which was due to expire in April 2016. Under the old plan, Discover had already bough back $2.1 billion shares in 2014. This means the company has just doubled down on the $1.1 billion-worth of shares it had left to buy. With this new buyback program scheduled to expire on July 31, 2016, this means the stock will have plenty of support in next 15 months. In another bullish move, the company just hiked its quarterly dividend by 16%, to 28 cents a share from 24 cents a share beginning June 1. This will put the annual payout at $1.12 a share, yielding 1.88% each year. Not only is Discover's annual yield higher than the yield paid out by Capital One (yield 1.60%) and American Express (yield 1.35%), it's twice the 0.74% yield paid out by both Visa and MasterCard . This means, based on the 447 million shares Discover still has outstanding, the company will be paying out $500 million each year in dividends, or roughly $125 million each quarter. With around $11 billion in combined cash and operating cash flow, making these payments won't be a problem. In addition, Discover shares look like a great value at just 12 times earnings. Among the credit card-issuing companies, only Capital One -- with a P/E of 10 -- is cheaper. Take a look at the chart. DFS PE Ratio (TTM) data by YCharts Assuming Discover was priced at the same valuation as both Visa and MaterCard, its stock would trade today at around $146, not $59. Even more conservatively, if Discover traded on par with the S&P 500 (P/E of 21), its stock would trade at around $110 or 86% higher. This may explain why the company is now aggressively buying back shares. So regardless of what Tuesday's earnings results may reveal in the near term, these are three reasons the stock remains a long-term bet. Must Read: 10 Stocks Carl Icahn Loves for 2015: Apple, eBay, Hertz and More
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